Friday’s ETF Chart To Watch: IndexIQ Canada Small Cap ETF (CNDA)

by on October 7, 2011 | ETFs Mentioned:

Stocks extended their gains into Thursday as investor worries about the euro zone debt crisis eased up a bit following encouraging comments by the European Central Bank earlier in the day. ECB President Jean-Claude Trichet said the central bank would revive its purchases of covered bonds and resume year-long loans for banks in an effort to inject liquidity into the financial system. Media icon and former Apple CEO, Steve Jobs, passed away at 56, leaving behind a legacy that will be remembered forever. Gold edged higher for the day, although the precious metal still remains range-bound, settling near $1,650 an ounce for the day.

The U.S. unemployment report will likely take center stage tomorrow as investors digest the latest round of data and look for signs of life in the stagnant labor market. Canada’s unemployment rate will be coming out an hour prior to Wall Street’s opening bell, making the IndexIQ Canada Small Cap ETF (CNDA) our ETF to watch for today [try our Free ETF Country Exposure Tool]. This ETF may see an increase in trading volumes as investors react to the latest employment report, with analysts expecting the unemployment rate to remain unchanged at 7.3%.

Chart Analysis

CNDA has  been beaten down severely since topping out at $36.65 a share on 4/8/2011. This ETF has lost over 30% since then, and recently it appears to have established some support near the $22.50 level [see CNDA Technicals]. Equity markets from around the globe have been hit quite hard over the past month, but foreign equities in particular have declined far more than their U.S. large cap counterparts. This small cap ETF has been facing serious headwinds as the economic recovery continues to move along at a sluggish pace.

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This ETF is currently at a very attractive level for those looking to place a bullish bet on the Canadian economy, seeing as how CNDA is trading at practically the same price level that the fund originally launched at earlier in 2010. Nonetheless, this ETF still bears quite a bit of risk since there really isn’t any definitive support levels to consider in terms of downside [see CNDA Fundamentals]. Also, CNDA is trading below its 200-day moving average, which means the fund is still in a technical downtrend and caution should be exercised.


In terms of downside, this ETF does not have much room to fall,  although its hard to pin-point a decent support level since historical performance is quite limited. A decline below the $20 mark would be very worrisome, in which case CNDA may trade down as low as $15 a share. If the employment report later today comes in better-than-expected, CNDA may stage a rally, potentially surging back above $25 a share [see our New Global Titans ETFdb Portfolio]. Conservative investors looking to long CNDA should wait until the fund establishes support above $30 a share before jumping in. Those who have an appetite for risk may consider buying in next week if shares establish definite support above the $25 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.

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Disclosure: No positions at time of writing.